Attn: Senator Dean Smith
Chair, Joint Committee of Public Accounts and Audit
PO Box 6021
Canberra ACT 2600
via email: firstname.lastname@example.org
16 April 2018
电影场景设计Re: Submission to Joint Committee of Public Accounts and Audit - Inquiry based on Auditor-General's report No. 19 (2017-18)电影场景设计
电影场景设计Summary: new Australian-developed technology can help the Federal Government increase the return achieved on its ongoing investment in Management Consulting services, while allowing smaller Australian companies to compete more effectively for Government purchases.电影场景设计
We acknowledge that we have no data related to the performance of any specific management consulting project that may have been undertaken by the Federal Government.
We do however observe that other large organisations experience a wide variation in Management Consulting project performance, and we would expect a similar pattern in the Federal Government’s results.
Figure 1 below shows the results of a study (Steven H. Appelbaum, 2005) which examined the performance of 83 management consulting projects conducted for a North American telecommunications company. The data illustrate a distribution of project outcomes, with many projects falling far short of fully meeting their objectives.
Figure 1 - Consulting Project Performance Assessment
Figure 2 shows the results of a survey of US Corporate Clients (Source Global Research, 2105) which examined the value created across a range of consulting projects, expressed as a multiple of consultant fees for the project. This shows that only 40% of projects are deemed as creating value net of fees for the client organisation, with about 10% of projects failing to generate returns which even cover the consultant fees. It can also be seen that almost all consulting firms covered by the survey (which included many of the leading firms) produced a mix of 'good' and 'bad' projects.
Figure 2 - Distribution of Return on Consultant Fees
We expect that a review of Federal Government Management Consulting project performance would reveal a similar pattern.
So, what sourcing strategies are available to a manager seeking to engage consultants and how effective are these in securing the required expertise? Currently, managers face difficult challenges in efficiently sourcing the consultants with the specific expertise that will enable higher returns/lower failure rates.
Firstly, the consulting supply market is very fragmented and opaque. Most managers would know only a handful of potential suppliers – based either on personal experience or on consulting company branding – and tend to select from within that small group.
Moreover, as consulting is an ‘Experience Good’ (Wikipedia, 2018), it has been difficult to assess the specific capabilities of a consulting team in advance , making selection challenging.
“Brand-based” procurement is a common response by which the purchaser relies on ‘Brand attributes’ as an indicator of likely performance. Consulting firms have become ‘known for’ specific areas of expertise based on their history in specific project delivery and can be expected to provide strong capabilities in those areas. However, there are several limitations to this approach.
Especially in recent years, consulting firms, alert to the opportunity to shape buyer perceptions, have invested heavily in brand development which may or may not reflect their underlying capabilities. One large technical and professional services organisation is estimated to have invested more than USD1 billion over a ten-year period in advertising (print, airport billboards, television, etc.) in an effort to shape buyer perceptions. In-house 'journals' and other publications can also be understood in this context. As such, brand reputation may reflect the consulting firm’s capacity to invest in marketing, rather than underlying capability.
More fundamentally, brand is a poor indicator of the specific capabilities of the project team assigned to any individual client. There are differing levels of capabilities inside every consulting organisation and the commercial pressures to deploy all of these into client work are large. Evaluation and selection tends to take place at the consulting firm level, with little emphasis on the capabilities of the team that will be involved in the delivery of the project (in some cases the specific consultants to be involved may not even be specified within the project proposal). Clients should critically evaluate the specific capabilities of the proposed project team and not rely on 'brand' as a guarantee of quality.
Organisations who purchase large volumes of consulting services, such as the Federal Government, may be able to build up an internal view of consultant capabilities based on their own experience base. In practice however, most organisations lack the systematic collection and analysis of individual consultant performance that would be required to support this. Furthermore, the client/consultant 'joint responsibility' for project performance has meant that the consultants are often not held to account for poor performance where it does manifest.
Consultant selection can also be influenced by the 'Relationship Selling' strategy employed by many consulting firms. In these firms, senior staff operate as Key Account Managers, with client sales volume targets and associated incentives. Their primary role is to identify new sales opportunities within the client and to achieve on-sell/cross-sell from existing engagements. This is not to suggest that there is necessarily anything inappropriate about these sales practices, but managers need to be alert that their 'Trusted Advisor' also has strong commercial interests operating.
Consulting firms which utilise these approaches argue that clients can benefit from the continuity and context that a Key Account Manager can provide. We note however that the research (Bronnenmayer, 2016) suggests that 'Trust' and prior relationship with the consultant has a low correlation with positive project outcomes. Indeed, the author notes that a high level of Trust with the consultant may "convince the client to waive special screening activities, such as investigations regarding the consultants' skills, competences or expertise". Clients may find expertise in their existing consulting relationships but should not rely on the relationship alone to deliver this.
Some organisations establish Preferred Consulting Supplier ‘Panels’. To our view, these are misguided and ineffective. Most significantly, they limit the pool of expertise available to the buyer which thereby puts the prime driver of project success at risk. Further, we believe the supposed benefits – the cost savings associated with the reduction in unit rates that the buyers generally negotiate as a condition of Panel membership – are illusory as they fail to control for the input volumes. Consulting firms on these Panels can be expected to protect their long-term margins (on which their business models are based) by simply extending the average project duration, which is a factor that the client has little capacity to judge and control. We are highly doubtful about the efficacy of these programs.
More recently, innovative approaches to assist organisations to identify, select and manage consultants have emerged. The use of technology underpins many of these approaches.
Bronnenmayer, M. W. (2016). Success Factors of Management Consulting. Review of Managerial Science, Volume 39, Number 6, Page 706.
Canback, D. S. (2017). The Logic of Management Consulting, Revisited. Retrieved from Canback Consulting
Christensen, C. M. (October 2013). Consulting on the Cusp of Disruption. Harvard Business Review, 106 - 114.
Consultancy.org. (2018). Global Consulting Industry. Retrieved from Consultancy.UK
Source Global Research. (2017). The Australian Consulting Market in 2017. Retrieved from Source Global Research:
Steven H. Appelbaum, A. J. (2005). The Critical Success Factors in the Client‐Consulting Relationship. Journal of Management Development, Volume 24 Issue 1, pp.68 - 93.
Wikipedia. (2018, April). Experience Good. Retrieved from Wikipedia